Merkel's in Hot Water... So All Future Backstops Will Be Even MORE "Strings Attached"

Phoenix Capital Research's picture


Spain, which is now at the forefront of the Great Western Debt Default Collapse, has opted to seek funding from the mega-bailout fund, the European Stability Mechanism (ESM) rather than going directly to the ECB or the IMF.


The reasons for this are clear: the IMF doesn’t have the funds (nor will it as the US won’t fund a European bailout during a Presidential election year). And the ECB is now backed into a political corner with Germany.


However, Spain is discovering that even ESM funding doesn’t come without strings attached:


            Germany Rejects Spain Banks Tapping Bailout Fund, Meister Says


Spain’s rating downgrade at Standard & Poor’s doesn’t alter Germany’s stance that banks can’t have direct access to Europe’s financial backstops, a senior lawmaker from Chancellor Angela Merkel’s party said.


“The German position is absolutely strict,” Michael Meister, the deputy caucus chairman of Merkel’s Christian Democrats, said in a phone interview in Berlin. “And since such aid programs require unanimity, there’s not going to be any change. All sorts of people can try to set things in motion, but Germany won’t vote for it.”


The ESM funding idea is really just Spain playing for time (the ESM doesn’t actually have the funds to bail Spain out). But the fact that Germany is now making the ESM a political issue indicates the degree to which political relationships are breaking down in the EU. And once the political relationships break down… so will the Euro.


Indeed, Germany has no choice. If it decides to prop up Spain it will receive a ratings downgrade (something which France is about to experience anyway). Europe with a downgraded Germany is not a pretty sight.


Moreover, Germany’s decision to prop up the Euro is finally beginning to arouse furor from the German population. In particular, the below story which reveals that Germany has in fact put German taxpayers on the hook for over €2 trillion in back-door EU rescue measures could be the proverbial tipping point that sends German voters over the edge.


German tempers boil over back-door euro rescues


Professor Hans-Werner Sinn, head of Germany's IFO Institute, said German taxpayers are facing a dangerous rise in credit risk from a plethora of bail-out schemes. "The euro-system is near explosion," he told Austria's Economics Academy on Thursday.


Dr Sinn said Germany is on the hook for much of the €2.1 trillion (£1.72 trillion) in rescue measures for EMU debtors - often by the back-door - that will saddle Germans with ruinous losses one day.


"It is a horror scenario," he said, warning that the euro system is splitting friendly countries into blocs of mutually hostile creditors and debtors, exactly the opposite of what was hoped.


Earlier this week, the Foundation for Family Business in Munich filed a criminal lawsuit against the Bundesbank, accusing the board of disguising the true scale of risk born by German citizens.


This is the last thing Angela Merkel needs right now. Between this and inflation arising in Germany she’s in major political hot water. So expect Germany to push even harder when it comes to fiscal austerity in the future…


On that note, I fully believe the EU in its current form is in its final chapters. Whether it’s through Spain imploding or Germany ultimately pulling out of the Euro, we’ve now reached the point of no return: the problems facing the EU (Spain and Italy) are too large to be bailed out. There simply aren’t any funds or entities large enough to handle these issues.


So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.


This report is 100% FREE. You can pick up a copy today at:


Good Investing!


Graham Summers


PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.


And ALL of this is available for FREE under the OUR FREE REPORTS tab at:










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waldocktrades's picture

Checkout, "The Bernanke Put - Euro Style." Pretty well sums up the attitude and futility of the ECB towards Spain.

HAhyperion's picture

Draghi makes me want to disavow my Italian Heritage 


Read some of Draghi and the other collective blockhead comments: What world are these bozo's living in?  Growth momentum with the highest EU unemployment in 20-30 years. I cannot read anything anymore and it is only 8:30 in the morning.  Tension” in sovereign debt markets and high unemployment rates are expected to dampen the underlying growth momentum, says Mr Draghi. A SNL REALLY??? applies here


HAhyperion's picture

Draghi makes me want to diavow my Italian heritage

Read some of Draghi and the other collective blockhead comments: What world are these bozo's living in?  Growth momentum with the highest EU unemployment in 20-30 years. I cannot read anything anymore and it is only 8:30 in the morning.  Tension” in sovereign debt markets and high unemployment rates are expected to dampen the underlying growth momentum, says Mr Draghi. A SNL "REALLY??? applies here

bshirley1968's picture

Blah, blah, blah.  We heard the same crap for months about the Greek bailout.  How the euro was dead and Germany was making plans to leave.  I made some big bets along those lines and got my ass handed to me in a bucket.

I know this time will be different because Spain is so much bigger, right?  Everyone in the world right now is screaming the end is near and yet the markets march onward and upward.  Spain was down 3% yesterday and will be up 2.5% today.  Germany will play ball because they don't have the guts to do otherwise.  If we had politicians who would do the right thing, we wouldn't be in this mess to begin with.  The fact that we are here, proves there is no leadership to lead us out but will "react" after the final grasp at straws and collapse.  If this "thing" can continue on in the face of all that is happening right now, it may continue for a long, long time yet. They can drag the up and down, back and forth out for at least a year on the Spanish bailout.  So saddle up it will be a ........long ride.

semperfi's picture

The best bet to make is with gold & silver - they will come out on top - but you have to be patient.

Bartanist's picture

I don't think the current crop of twisted politicians and technocrats realize that they are (IMO)  the advance guard to be sacrificed for the benefit of learning the character and positioning of the opposition. It is all distraction and not the assault.

Also, IMO, they play no part in the long-term future of the management of the world. The fact that they are such deplorable bores and characters makes it all the more ironic. "As if" THEY think they are of any importance ... lol. 5 years from from now we will not even remember Bunga Bunga and Mercozy.

I have confidence that the world will be set right, but not in the way that anyone currently thinks. This is all just something we need to go through and certain people are handling it better than others.

rsnoble's picture

Is Merkel Hitler's daughter or was that just a conspiracy floating around?

HAhyperion's picture

She certainly has the same style haircut.

Nussi34's picture

Exit the Euro, enter FREEDOM!

Apostate2's picture

Guernica could bring a bit of dosh-or all those Goyas stashed around the country churches. Why not the Belles Artes in Saville? I would bid on the 'Death of a Matador'.

As for France--oolala.

falak pema's picture

In the presidential debate yesterday Sarko dropped a clanger when defending his Euro position and past track record over five years :

1° He opposed Hollande's proposal for Eurobonds saying he would "NEVER" guaranty debt as ultimate backstop of Eurobond emission along with Merkel; aka Merkozy IS ECB. The message was loud n clear : if those Spanish fukkers burn, too bad, let the markets rape them!

2° He denigrated the socialist governments in Spain/Greece and Berlu in Italy, partners of Euro money, saying  of Berlu "he is not and never was one of "US", meaning as a conservative politician he was a shit like the socialists.

In the turmoil of current Euro zone this just etches out very clearly the "every man for himself" attitude of Merkozy relative to THEIR COMMON MONEY, THE EURO.  Basically, Sarko is saying that if Spain goes under, it will weaken the Euro and that's in a way good! As OUR exports in France/Germany improve. So Euro debasement via peripherals burning is NO BIG DEAL. And let the sheeple burn in SOuth Europe, they asked for it.

How anybody  so POWERFUL, who understands the economy, can say this before the Nation on TV is beyond my comprehension. Basically Sarko is saying "the PRIVATE DEBT of MY BANKS is not a problem". Which is an absolute LIE.

If Spain tanks as the spread gets out of hand their BANKS TANK, as the debt in Spain is PRIVATE due to RE shenanigans. If the Spanish banks tank, then the ITALIAN banks tank as they are very implicated in Spain. If the Italian Banks Tank the French Banks tanks. And the Euro Burns and then its HELL in FIAT CURRENCY WORLD world wide. Its mathematical and known to the whole world. 

This is the implication of the scenario that Sarko proudly announces, saying that France will not go down as we are "protected". How??? 

Having admitted that Euro wiill probably devalue due to uncontrollable SOuth Europe austerity wind-down, starting with government bond spreads going viral, infecting the banks etc., he is admitting that the financial spiral of banking collapse IS IMMINENT.

Buy making this announcement on national TV, all he is trying to achieve is his REELECTION by finger pointing to his socialist adversary and saying "you are on the same page as the Greek and Spanish Socialist shills that got us into this mess". 


As the second key political figure in the Euro zone he has just ADMITTED that the EURO leaders/ECB have no effective firewall to protect their financial zone. Thus he has FUELED the fires leading to the demise of the Euro itself in a desperate "last ditch stratgey" to debase his opponent, all to ensure his own election. 

Can one be more suicidal and inconsequential than that? And, he lost the debate... It won't change the current 54/46-53/47 poll prediction for the Sunday election in Hollande's favour. 

We are in for a turbulent summer in Eurozone!


Ghordius's picture

falak, I am not French, but as I read it Sarkozy is now in the end-phase of this campaign where he thinks he has the moderate right in his pocket and he has, desperately, to win the far right, so some "far right bullshit" and some "they are all socialist and idiots" bashing is required by his strategy...

the big question is if the far right will prefer to stay at home and have a Socialist Prez or will hold their noses and go out and vote

and kicking Berlusconi is anyway fashionable, isn't it? remember how he was shitting his pants at the thought of facing DSK?

Zero Govt's picture

Yep, i fail to see how Sarkozy thinks France is "protected" when the French Govt itself is bankrupt

...just ask empty Louis Vitton handbag IMF chief, Christine Lagarde, the previous 'cashflow expert' of French Govt finances that robbed pensions to pay short term cash needs ..the French Govt couldn't backstop an icecream van it's so insolvent

falak pema's picture

Governments are NEVER bankrupt as they can tax to bleed their citizens. France has 17% of gDP as private savings, very high, relatively speaking. But...The banking debt is 300-400% GDP...there lies the problem, just as elsewhere. Even if the banking sector tanks for 20% of its balance sheet, that is HUGE relative to GDP, and would bring down Eurozone; as a similar scenario in Spain-Italy. its the private sector bank debt that holds the ENTIRE west by their nuts, not so much the public debt.

The whole Euro shooting match like the USD situation is about unending private banking debt. ONly REAL issue in town; as if/when the banks go belly-up it will end up as PUBLIC, like in 2008!

semperfi's picture they can tax to bleed their citizens.

Like popping a big zit - you get less than you imagined.

drunkenlout's picture

Vell, I've never been to Spain

But I kinda like the Maastricht



Eireann go Brach's picture

Hail Hitlar said the Greeks!

Zero Govt's picture

the Greeks shouldn't throw stones in glasshouses given Hitler was the last person to wreck Germany, it's been on the up ever since

whereas the beloved "Birthplace of Democratic Govt" has been going stone cold broke every 14 years on average. The Greeks truly are the dumbest fucks in Europe and deserve to go down in flames for repeatedly resurrecting the rotten to the core and wrecking crew that is the institution of Govt

eatthebanksters's picture

you vill sign ze papers!

The Reich's picture

Euro is a peace currency. /not

boom goes the dynamite's picture

three dog night or spain = no match for Rammstein.